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1 Apr 2022

Nelson Banya & Helen Reid; Reuters

Zimbabwe: Reports indicate that Chinese banks are pulling out of financing coal-fired power plants

‘In Zimbabwe, coal power project seeks other backing after China's U-turn’ 30 March 2022

A Zimbabwean company that had been banking on Chinese financing to build a major coal-fired power plant says it is now looking for alternative backers as China pulls back on funding such projects overseas. The effort by RioZim Ltd (RTNR.ZI), one of Zimbabwe's biggest mining and energy companies, reflects how China's recent U-turn on foreign coal financing is forcing developing nations across Africa and Asia to rethink their energy plans. China, which had been a top funder of coal power projects around the globe, announced in September it would not build new coal projects abroad as part of efforts to curb future carbon emissions. Energy and climate specialists are watching to see the impact, including whether it will force a speedier shift to cleaner energy, result in other funders stepping in or lead to power shortages. Zimbabwe, which already suffers from a lack of electricity, has among the biggest coal reserves in Africa.

…Now, Rio Energy is considering alternative financing plans. "We are still in the market to fund the project and we will work with all possible funders, including the Chinese," parent RioZim told Reuters. The company said another option under consideration is to transform the project to a gas-powered plant, but that idea is "subject to the outcome of feasibility studies" and no time frame for those has been set. RioZim told Reuters that ICBC and Minsheng Bank "came in to play a supporting role" but that it can't comment on the current status of their involvement because it doesn't have a direct relationship with the companies. Chinese bank financing for coal power plants overseas has often been arranged to support Chinese construction companies, which then enter into building contracts with the company planning the power plant.

…Renewable power advocates in Africa and elsewhere say China's pullback from coal power provides an opportunity to clean up. Zimbabwe is expanding its plans for generating renewable energy, such as solar power, but such projects can require fewer permanent employees than coal, making them less attractive for governments keen to generate employment. Sydney Gata, executive chairman of the Zimbabwe Electricity Supply Authority, said that an instant switch to solar and wind isn't feasible given the scale of the country's power needs.